News

Market Commentary

02/06/2018

March corn up ½ at $3.5925

March beans up 5 ½ at $9.7525

The DOW is down

USD is stronger

Crude oil down $.87 at $63.28

Good morning,

Stocks posted their biggest single one day loss in the markets long storied history, falling -1,175 points as the Dow pulled back -10% from it’s most recent high. Keep in perspective however, on Black Monday, October 19 ,1987, the market fell -22% in one day. Also keep in mind, the Dow is still up nearly +40% since Donald Trump was elected president. Insiders report yesterdays heavy stock market selling was aggressively triggered when the S&P500 fell below its 50-Day Moving Average, something that hasn’t really happened since September of last year. Interestingly, the selloff was on heavy action, about 300% of the markets normal daily volume. Before this past Friday, the S&P 500 had gone the longest stretch ever without even a -3% pullback. Remember, the financial world doesn’t consider it a “bear market” until we witness a loss of -20% or more.

The corn market was almost a trading world afterthought Monday, given all of the “excitement” in some of the outside markets. Corn spreads were also a major feature, with H/K trading over 100,000 times. Managed Money traders were viewed net sellers of about 10,000 corn. When including the latest CFTC report, we believe they are heading into tonight net short close to 155,000 corn futures and options. Technically, the corn market is testing its support in the $3.58 to $3.56 area that should handle the break. Expect buying in this range. Still looking for a further rally to 2nd counts at $3.66. At this point, a close over $3.62 ½ should accelerate us into that level and potential to challenge the fall range highs near $3.70.

Mid-day grain inspections continued the trend toward improvement for corn. 1.074 million metric tons of corn were shipped through Feb 1st, which was larger than expected, but still fell short of levels shipped out this time last year (1.123 mmt). This takes total sold + shipped to 14.84 mmt vs. 22.01 mmt this time last year. There were a few cargos of milo shipped out, but those could be few and far between in coming weeks. China reportedly opened an anti-dumping investigation into US sorghum. Most feel this is a “tit-for-tat” response to recent tariffs imposed on Chinese solar panel exports. While this may add another brick in the trade wall of worry (right next to NAFTA), we only see this as finally trying to normalize milo basis relative to corn. Cash sorghum values have been off the charts due to the export pull. Cash corn in China caught a bid. USDA reported another two cargos of corn booked to South Korea, continuing the theme of expanding US corn export business to rest of Asia

Yesterday’s gap action has the bean market finally breaking down its choppy range as we take aim on the $9.50 to $9.60 area. Right now, we‘re a bit oversold so that could give us a bounce but expect problems against the $9.80 area.

The combination of U.S. ethanol prices at 12-year lows and soaring prices in Brazil has opened a wide arbitrage to import anhydrous ethanol from the U.S. A large Brazilian trading company estimated that January to March the total volume of anhydrous imported from U.S. might reach 712,000 cubic meters. Estimates from S&P Global Analytics point to Brazilian imports from the U..S of 650,000 cubic meters in the first quarter of 2018. After the January-March period imports from US were estimated by a source to drop to 120,000-140,000 cubic meters per month. Despite the open arbitrage, a logistical bottleneck might hamper the high volume expected to leave US ports. “It has not been easy to charter motor tankers and find terminal vacancy. The demand from other importers has been strong too,” said a US exporter. (Source: Platts)

Archer-Daniels-Midland Co. is in advanced talks to acquire commodity trader Bunge Ltd. according to people familiar with the matter. ADM and Bunge, which has a market value of about $11 billion, could reach an agreement as early as this week, the people said, asking not to be identified because the deliberations are private. The takeover talks are ongoing and could still fall apart, while other bidders could still be interested in acquiring Bunge, the people said. ADM is scheduled to announce full-year earnings on Tuesday. The potential ADM-Bunge deal may trigger a bidding war as Glencore Plc made an approach last year to Bunge about a merger with its own agriculture unit. (Source: Bloomberg)

Bayer has offered additional concessions to European regulators regarding its $63.5 billion bid for U.S. rival Monsanto in an antitrust review that will now be extended to April 5. The proposed remedies “are very significant and we are confident they fully address the European Commission’s concerns,” Bayer said in a statement. The European Commission said that the deadline for it to conclude its antitrust investigation had been postponed to April 5 from March 12 previously. Bayer maintained it was still aiming to wrap up the deal “in early 2018”. Both the EU Commission and Bayer declined to say what assets Bayer had offered to put on the block.